Walters: Scott, Legislature Remain at Odds

The Vermont legislature began a special session Wednesday as ordered by Gov. Phil Scott. After brief floor sessions, key House and Senate committees heard presentations from administration officials and their own fiscal analysts — and it became clear that nothing has really changed.

If anything, the two sides were a bit further apart than they were a week and a half ago, when the legislature adjourned after approving tax and budget bills that the governor promised to veto. Presentations by administration officials Wednesday were met with a barrage of skeptical questions, and their answers did not satisfy majority Democrats.

The administration is still presenting virtually the same plan it put forward in early May. "I didn't see any changes from what they presented before," said Rep. Janet Ancel (D-Calais), chair of the House Ways and Means Committee, after the House hearing.

Scott's plan still calls for the use of onetime money to keep property tax rates level for the fiscal year starting July 1, although the amount of those funds has shrunk from $58 million to $44 million. Scott says the money would be paid back over five years with some of the savings realized through his proposal to rein in school costs. The administration estimates the savings at $300 million.

Administration projections of those savings are profoundly different than those of legislative analysts — which leaves lawmakers in a state of uncertainty.

"I'm very concerned with these aggressive savings without seeing any analysis behind it," said Rep. Kitty Toll (D-Danville), chair of the House Appropriations Committee. "In early May, I asked the administration for the analysis for some of the proposals, and I didn't receive anything."

 In a joint hearing of the Senate Appropriations and Education committees, Senate President Pro Tempore Tim Ashe (D/P-Chittenden) expressed "tremendous doubt" about whether the savings would materialize, and on the schedule predicted.

“Theoretical savings or theoretical growth,” Appropriations chair Jane Kitchel (D-Caledonia) said, “generally cause us a great deal of anxiety.”

Scott's five-year cost-cutting plan includes statewide teacher health care negotiations, lowering the spending threshold that triggers financial penalties for school districts, an increase in student-to-staff ratios and changes in special education funding.

The legislature's Joint Fiscal Office asserts that Scott's savings numbers are overestimated or unprovable. For instance, Scott's ratio proposal accounts for roughly half of his plan's projected savings. "But there's no mechanism in the proposal to make sure that [a ratio increase] occurs," fiscal analyst Mark Perrault told lawmakers.

The JFO also cast doubt on whether statewide health care negotiations would save money. Its projections show either a smaller savings than the administration projects or even a cost increase, depending on what kind of health care plan is negotiated.

Even the governor's core idea — holding property tax rates level — came into question on Wednesday.

In a letter to legislative leaders delivered on Tuesday, Scott wrote that "if the Legislature wants to raise property taxes at a time when we have significant surplus revenue, it will have to override a veto," and that his plan would "strengthen our education system without raising property taxes."

Problem is, Scott's plan would raise property taxes for a lot of Vermonters. He is not insisting that every town's property tax rate stays level; Scott wants the statewide average to remain level. "We're referring to averages," said Finance Commissioner Adam Greshin. "With averages, some districts are above and some are below." Indeed, a legislative fiscal analysis shows that under Scott's plan, property tax rates will rise in 127 communities.

Rep. Toll pointed to Scott's letter and asked about the apparent dissonance.

"We made it clear we were talking about the rate," said Tax Commissioner Kaj Samsom. "What the governor means is average property tax rate."

"It's not clear to me," Toll replied.

The takeaway: Scott promotes his plan as preventing property tax increases, when it absolutely will not do that.

Lawmakers left the day's activities no more sold on the Scott plan than they were before. "I'm hearing sound bites," Toll said. "I'm not hearing the analysis behind the sound bites. As chair of House Appropriations, it would not be responsible of me to go with this plan when I don't have the analysis in front of me."

The Democratic majority remains firm on its proposed $34 million payment into the teacher pension fund, which was badly underfunded through most of the 1990s and 2000s. They say the payment will save more than $100 million in future interest. Scott argues that the savings won't be realized until the year 2038, so he prefers to put the money toward keeping the average property tax rate level.

"We have had extensive testimony. We know it's real savings," Toll said. "It's a sure investment, whereas I'm not sure about some of the proposals put in front of me."

There were also signs of a disconnect between the governor and Republican lawmakers. House Minority Leader Don Turner (R-Milton), accompanied by about 20 members of his caucus, held an impromptu press conference to pitch a somewhat convoluted compromise plan. Turner wouldn’t come out and say he didn’t support Scott’s plan, but the Republican proposal seemed like an implicit rebuke.

“We don’t support using onetime money for ongoing expenditures,” Turner said. “This doesn’t do that.”

The plan, like Scott’s, would keep property taxes level but it also includes several cost-containment mechanisms. Essentially, it would cause steeper tax hikes in high-spending school districts, an idea the House Ways and Means Committee considered earlier this year. Turner said he had not presented the latest plan to either the governor or Democratic legislative leaders.

The legislature will return next Wednesday. In the meantime, key committees will hold hearings on tax and budget issues.

Administration officials sound optimistic. "We're not that far apart," said Greshin. In his letter Tuesday, Scott wrote, "I believe we are much closer to an agreement than the political rhetoric and corresponding media coverage indicate."

But if the two sides are closer together, it's only because the legislature moved toward Scott's position in the closing days of its regular session. Scott has seemingly not moved an inch. He wants it all: the onetime money and the five-year savings plan.

The endgame remains just as unclear. And no one claimed to have any idea how the situation can be resolved, or how long it will take.